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Interview

with John Olaf Naesheim, Director & General Manager Norway, Swire Oilfield Services AS

28.03.2013 / Energyboardroom

In 2013, the NCS will remain the number one offshore investment destination and represent a USD 37 billion market. As the global leader in cargo carrying solutions and Modular systems, how do you see Swire Oilfield Services’ current ability to support this rapid industry growth from its existing facilities in Norway?

Our strongest resource in meeting the increasing demands from the industry is still our staff, our market leading products and service range and our presence at all major supplybases serving the Norwegian continental shelf. One of our main successes over the last few years has been maintaining a very low employee turnover of around two or three percent; these figures are among the best in the Norwegian oil and gas industry. Given our human resources capacity, we have the capacity to incorporate the growth that we expect to see in the coming years. Nonetheless, it is inevitable that we will have to expand on our staff in the coming years.

Today, attracting employees is not just a matter of salary. We need to inspire them with new challenging projects and collaborative environments. Our new facilities here in Tananger should help us attract the right candidates. As many applicants are showing a strong interest in Swire Oilfield Services, I am confident in our current and future human resources capabilities and their ability to match the demand side.

In terms of our physical presence along the NCS, we have in addition to our new “state of the art” facilities in Tananger, established bases manned with Swire professionals in Bergen, Florø, Kristiansund, Sandnessjøen and Hammerfest. This has been possible based on our strong relationships with the supply bases like those of NorSea and ASCO and of course our customers. We have scope for more capacity and our focus will be on providing optimum services both for existing customers and new customers.

What are the challenges you see in scaling up activity?

In a situation where the service industry are facing high investment levels and increasing our activity with salary inflation and a tight labor market, the expectations from our customers to lower prices present a significant challenge. There will be a strong pressure on margins across the supplier network in the years ahead. Given this changing dynamic we must adapt and become even more efficient and proactive to generate results.

Where can Norwegian suppliers look for inspiration on managing these volumes and enhancing utilization and efficiencies on existing facilities?

It is not just about choosing one place where we can find improvements. We can learn from all countries. In Swire Oilfield Services we have quarterly management meetings, which are the perfect place to share ideas with our colleagues from the USA, UK, APAC and Africa. I believe the best ideas are always the result of the collaboration between different offices and not just the result of gaining inspiration from one organization in one location. These meetings take place at the managerial level, but we also have our employees switching between our offices to share experience.

How much collaboration and synergy potential is there within the Swire group within this market?

The growth within Swire Oilfield Services has been so large that our main focus up until now has been to facilitate that growth internally. We have potential to collaborate more with the greater Swire network. It is for example interesting that last year Swire Pacific Offshore bought Swire Seabed, serving the marine segment in Norway. They are engaged with marine services and serving the same clients as we are. The two organizations can therefore share ideas and collaborate in marketing at events like the Offshore Northern Seas conference (ONS). There is some way to go in terms of maximizing this potential.

And internationally?

Collaboration is at the center of our priorities within the Swire Oilfield Services group. We have for example colleagues from Brazil and the US coming to Norway to learn more about Swire Modular systems (SMS)and share ideas. In our new SMS facilities in Tananger we have the group center of excellence for the SMS product line and to succeed in maintaining our position as market leader we benefit from close collaboration with colleagues from the rest of the world and close interaction with our customers.

Innovation is a key element of our strategy in cost reduction and this requires collaboration. The high cost level in Norway is a driver for greater efficiency and we are now producing equipment in Norway that is being used in APAC, West Africa and globally. Norway is a high cost environment and we have to be innovative in order to be competitive in these markets.

How do you deal with the fact that other markets are nowhere near the level of advancement as Norway when marketing your solutions?

There are parts of the world where equipment is currently being sent offshore in wooden boxes. Indeed this was also the case in Norway at the beginning. One important driver for the market has been and will also in the future be Health, Safety, Environment and Quality (HSEQ) regulations and Swire brings a lot of experience to this field. This experience can act as a differentiator in foreign markets.

In the long run, just as Norway made its transition towards higher standards, I am confident that other markets will follow. There are some extreme circumstances, which are specific to Norway, but major international trends towards improving standards are apparent and spurred on by incidents like Macondo. Indeed when this disaster happened, many Norwegian experts were invited over to discuss the regulations and provide their experience. Regulations, which begin in Norway, under Norsok, will filtrate to other markets in the world, starting with the UK and Gulf of Mexico and then on to other jurisdictions. We are dealing with global players and it is hard to justify a significant difference in the standards of one office compared to another. Customers who have seen what we can achieve in the Norwegian market, expect the same quality everywhere.

For many years, we have been providing special equipment (bespoke cargo carriers) to one of the global leaders in the subsea segment. We have been invited by them to perform the same work in Houston, in Brazil, UK, and Africa. We have a special team of experts within our organization in Norway that handle this segment and facilitate the development of this product line also at other Swire OS locations globally. We are therefore exporting the Norwegian way of doing things to these countries and whilst it will take some time to implement the north sea standard, it will happen.

As a cargo solutions provider, Swire offers both standard and bespoke cargo carrying solutions. How would you compare these two elements of the business?

Within the cargo carrying solution, there is a strong base demand for traditional containers and tanks and it is relatively easy to enter this market as a supplier. However, we have experienced this segment to become more advanced the last years with for example radio frequency identification (RFID) and increased design demands/functionallity – it is certainly more technically advanced today than five years ago. The second segment is the bespoke, special design segment and we are focusing a lot on this. We expect the biggest increase in our growth to come from bespoke units.

The design and documentation element s makes this a more restricted market with less easy access for other players, therefore we will continue to invest in that segment to increase our competitiveness and move up the value chain.

What do you see as your major priorities in the development of this company in Norway over the coming years?

We need to facilitate growth without compromising on quality, safety and our core business operations. Our main priority is on the more advanced part of our business – Swire Modular Systems and the special units division as well as supporting services such as maintenance and testing. Norway’s role within Swire Oilfield Services over the coming year will be highly significant in the advanced part of Swire Oilfield Services business.

We face a challenge to our business margins in this booming market. Demand is increasing, but we see an increasingly competitive landscape, which will engender difficulties in maintaining our margins. In addition, human resources are a great challenge to face, even though we have been cautious and efficient so far on that front. Nonetheless, Swire is a strong player in this market and we are confident in our model, which provides well-tested equipment for the safe, secure, and effective storage and transport of expensive equipment. And as our motto states, Swire Offshore Services is both a reliable and dynamic partner for the offshore industry in Norway.

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